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AOL cuts, then reinstates 401(k) matching

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AOL just reversed its decision to stop making matching contributions to employees' 401(k) accounts on a per-pay-period basis. Originally the company blamed Obamacare for forcing it to trim employee benefits. Now, in an email sent Saturday night, CEO Tim Armstrong said executives at the company changed their minds to satisfy employees.
(Justin Sullivan/Getty Images)

Last week Obamacare critics had a fresh piece of news to volley about: AOL blamed the law for its much-maligned decision to cut employee benefits, moving from matching 401(k) contributions per pay period to depositing a lump sum at the end of the year.

Then CEO Tim Armstrong changed his mind, according to an email he sent to employees late Saturday.

"The leadership team and I listened to your feedback over the last week," he wrote in the email message. "We heard you on this topic. And as we discussed the matter over several days, with management and employees, we have decided to change the policy back to a per-pay-period matching contribution."

News about the scaled back 401(k) plans at AOL broke on Tuesday when the Washington Post ran a story comparing the company's move to IBM's announcement in late 2012.

AOL had stopped matching funds on January 1 and workers who left the company before Dec. 31, voluntarily or otherwise, would have missed out on the year-end matching funds in their retirement accounts.

"Obamacare is an additional $7.1 million expense for us as a company, so we have to decide whether or not to pass that expense to employees or whether to cut other benefits," Tim Armstrong, AOL chairman and CEO, said during an interview on CNBC last week.

AOL is fresh off a very productive year. In the last three months of 2013 the company announced that it had earned $679 million. Over the last three years, AOL's stock price has grown by 119 percent.

AOL's Q4 earnings report, which it released on Thursday, started off with this quote from Armstrong: "2013 was AOL’s most successful year in the last decade, and we accomplished our goal of industry level growth at scale for AOL."

According to a transcript leaked by an AOL employee, Armstrong's explanation to workers hasn't gone over smoothly.

According to the transcript, which was given to Capital New York the CEO inadvertently singled out two workers who had what he called "distressed babies" in 2012.

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"Two things happened in 2012," he said, according to the leaked transcript. "We had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babes were OK in general. And those are the things that add up into our benefits cost. So when we had the final decision about what benefits to cut because of the increased healthcare costs, we made the decision, and I made the decision, to basically change the 401(k) plan."

The exec later clarified his remarks in an emailed memo, which the Huffington Post published.

"“This morning, I discussed the increases we and many other companies are seeing in healthcare costs,” Armstrong wrote in the email. “In that context, I mentioned high-risk pregnancy as just one of many examples of how our company supports families when they are in need. We will continue supporting members of the AOL family.”